December 22, 2019

New Saudi procurement law will create favourable market for construction projects in 2020

2020 begins just a month into the Saudi Government's new Government Tenders & Procurement Law (GTPL), which came into effect on 1 December 2019, and government and contractors will be keeping a close eye on how the law works in practice in the market over the next year.

Foremost among the changes in the GTPL, which applies to all appointments by government entities,  are the new provisions for centralised tendering and contracting. These provisions mean a designated Central Entity may request tenders for works it deems to be required by more than one government entity, and engage contractors / consultants on the basis of framework agreements or its own contract forms. This increased focus on centralised processes is designed to promote greater transparency, predictability and efficiency in tendering.

Similarly, the Regulations will lead to better infrastructure outcomes by granting Government Entities greater flexibility to tailor contract conditions (e.g. beyond the Public Works Contract) to particular project requirements.

There are higher maximum delay penalties and new provisions for the termination of contracts by a government entity, and if a project eventually ends up in dispute, the GTPL requires the referral of disputes to the Board of Grievances. However, in a crucial difference to the law it replaces, government entities may agree to arbitration upon approval by the Minister of Finance.

Taken altogether, we predict that 2020 could herald a more favourable market environment for international contractors and consultants seeking to be appointed on government projects. This can only benefit Saudi Arabia's ambitious infrastructure program next year and in the years ahead.

Read the rest of our projects & construction predictions here.